 Thanks for much, John. And I'd really like to stress, be contentious, speak up, talk, make a lot of questions and stuff. We don't know a whole lot in the academic sector about this issue yet in terms of evidence, things that we can say for sure. And so to the extent you can help us frame the questions and give us good arguments, we can then go forward with the research. This research is joint with a doctoral student of mine, Matt Marks, and as with all good advisor-student relationships, Matt has done all the hard work here. So I would encourage you to talk to him afterwards. He's really on the ground right now and in the trenches on this issue. It's also, there's some co-authors as well in our research. So I'd like to start with where we think we are at in the academic literature, and then I'll move into more speculative stuff and try and throw some questions into the arena for discussion. It may come as some surprise, but up until recently a lot of academics didn't think non-competes even mattered. They just sort of dismissed them. And yeah, people have talked about non-competes, but I don't see them having any influence. There was a law article in 1999 saying that Silicon Valley was caused by non-competes. A little bit of exaggeration, but that was the gist of the article, of the argument. But there was very little evidence. And as recently as 2006, there is a paper in a good stats journal, a good economics journal, saying, yes, California seems to have greater mobility, but we have no idea if this is caused by non-competes. The problem here is that there's no experiment. But a couple summers ago, we were digging around in our research about non-competes. We found out that the state of Michigan actually provided us a wonderful natural experiment. In 1985, they changed their non-compete law without even realizing it. They did an antitrust reform act and buried deep in that act was a line which enabled the prosecution of non-competes. So we've been using that as a natural experiment to try and get some causality here and get some more convincing evidence. So what we're going to talk about today in our work is there's five million patents. Basically, we've got this from the patent record. And also Matt has gone out and done 67 interviews with people. Matt is actually a very interesting person to talk to as well because he's lived the non-compete as a technical contributor. He's made some career choices because of non-competes. He's also managed in Silicon Valley and then on the other side of the table and had to deal with the lack of a non-compete in Silicon Valley. So what do we find? The non-competes appear to attenuate mobility, as you might expect. Perhaps more interestingly, it's the specialist who gets hit harder. Specialists become less mobile in a region of non-competes. This is important because if you think about people coming together, the experts coming together quickly to exploit a new opportunity to develop a new technology, if these people can't come together, if the best people in the region can't come together quickly, that's going to slow things down. We also look at other patent data besides the Michigan experiment, as we call it. We're now looking at the historical data from the last 40 years of people moving around, patent holders moving around the United States. It's not causal, but we do see a drain of people and ideas from regions that enforce non-competes to regions that don't. Again, this is historical. I can't tell you that non-competes cause this, but you see this effect. California is very strong on that effect, but it's not just California. What Matt is finding from his field work, a couple of interesting ideas, people, when forced to confront a non-compete, tend to abandon their expertise and move into a different field. That's the most common response to a non-compete you're trying to deal with. Also, I think it's not a strong effect that Matt is finding, but the other interesting thing is that they tend to seek refuge in large firms, firms that will protect them from being prosecuted. They tend to avoid employment in startups and they tend to avoid employment in small firms in general, just because those firms generally don't have the resources available to protect them. That was the evidence that we think we know, and now I'm speculative. I like to throw these out there and hopefully get some feedback from you and also prompt you to ask some of the good questions too. I think the biggest reason that I've heard, the best reason I've heard advanced to have non-compete laws is that firms will not invest either in R&D or in their people if they've got, if they can't guarantee or at least think they can keep those people. If people are going to leave, why are you going to invest in them? Also, they may do less R&D because if they're going to lose their proprietary secrets faster. Empirically, in the research we might get at this in a variety of different ways. I'm also curious if you have any ideas about that as well. We have no evidence on this. My own personal experience, I cut my professional teeth as an engineer at Hewlett-Packard in the Valley. I got my master's degree from Stanford through the Stanford Instructional TV network. That's been in place since 1968. Tens of thousands, maybe more engineers have gotten their education there. This is an institution in the Valley. Everybody does it. Everybody pays for it. It doesn't appear to be a problem in the Valley as far as investing in people. That's just one data point though. As an empiricist, I'm very reluctant to draw any strong inference from that. One thing you might be concerned about is that if you're optimizing for a manager who wants to keep her employees, keep her R&D inside the firm, are you optimizing for that firm but at the expense of the region? Is there a real trade-off here? You would expect that it's the best people who are experiencing the problems, who are at the forefront of the technology. It's the best managers and sales people in the trenches doing the work. They are the best people to choose the next big opportunity. They will make career choices with their own feet in terms of whether they're going to go exploit that opportunity. If these are the people who cannot do that, then I'm concerned that a reallocation of resources is going to be hampered and you're going to have a less efficient use of those resources as a result. This isn't just individuals that do this. It can also be entire teams. It's pretty common in the Valley when someone moves to another firm, especially a manager, that he or she will take their entire team, lift them out, and move them to the next firm. You're bringing a huge amount of human and social capital, and hopefully you would think you're bringing it to bear on a more important opportunity. A little more provocative, and I'm curious for feedback and pushback on this, you might expect that if you don't enforce non-competes, such as in Silicon Valley, that that's going to help the best firms move more quickly and it's going to actually hasten the demise of the firms that aren't as well managed. Or the firms that made the wrong bet on the technology. The firms, for whatever reason, are going under. Again, the best people are going to see that the first, they'll see that most quickly, they're going to be the first people to move. So there is absolutely not a shred of evidence for that, and we haven't even started to formulate a research design to investigate that idea. So a couple more ideas here. What effect might non-competes have on the inside of the organization? One idea, Carlos Baldwin has mentioned this, one of my colleagues, and also Matt has heard this in his interviews, is that a manager might actually modularize their organization in order to keep employees from knowing too much, in order to protect themselves, to make them less vulnerable to one of those employees leaving who has the entire architecture in his or her head. So it might be interesting to see if the organizational structures of firms in regions that enforce these things is different from those, from the structure of firms in regions that don't. When it comes to the individual, are people going to work harder because they're afraid of losing their job? So if they're afraid of losing their job and not having an opportunity, or are they going to work harder because they have an external market where they can sell their skills? It's not clear if there's going to be any productivity difference as a result of whether a non-compete can be enforced in a region. And finally, closest to my research here, do people work more creatively with or without a non-compete? You could expect that without a non-compete, people are less worried about taking risks. They may be more creative and try crazier stuff. They're more likely to fail, but they're less concerned about that because even if they fail at a current job, there's a more viable external labor market out there. On the other hand, and Matt has some anecdotes to this effect, there's a big argument in the creativity literature that people are most creative when they move fields. And so even though somebody may have changed their career or changed their technical emphasis for reasons of a non-compete, maybe that's good. Maybe that's good for the region because it promotes the mixing and sort of juxtaposition of different ideas and causes people to be more creative. So again, not a stitch of evidence for any of this stuff, speculative, but hopefully that's a way to start off the conversation. Professor Fleming, thank you so much. Next up is Paul Maeder, one of the founders of Highland Capital Partners. He's an extraordinary leader for the National Venture Capital Association and for the industry at large and someone who alongside Bijan has been making the case here in Massachusetts about this topic. The academic has presented us with anecdotal evidence, work in progress. Mr. Maeder is also going to present us with some data as the venture capitalist looking at this issue and investing in this region for several decades. Thanks, John. I am all those things, but I'm not a Mac user. I see, I see. All right. Well, Amar Asher is. I got a couple of slides here that we're going to pull up. It's one of those two. No, it's not that one. That one. Very beautiful. All right, great. Do you mind if just hanging on after Paul and then we'll take a few? Is that okay? Right, we'll queue it up for sure. And when you do speak, please do go to the microphone just because this is being recorded and people externally will hear. So thank you. All right, great. And it's great to hear there's some questions and hopefully some disagreements. So I've just got a little stimulating canonical example here that I want to present. I think there are a lot of different ways in which non-competes are destructive. And I would argue I would amplify on what Lee said and say from my personal experience, it actually, I think is a significant factor in the difference in prolific start-up activity between California and Massachusetts. I think it's actually a significant factor and one that's been overlooked for quite some time now. I think they are bad for individuals and that's obvious. They're bad for companies because they allow them to get lazy and they're bad for society as a whole for an ecosystem of start-ups and technology advancement. But we'll get into that shortly when we get into discussions and start responding to questions. I just wanted to put up the results from a study. I gave a talk on this topic about a year ago and had a devil of a time finding any studies or any papers on the web and I actually found one and then lost it again, but ultimately refound it. And it actually was an academic paper from about five years ago that graded states with respect to enforceability of non-competes. Now we know correlation doesn't guarantee causality. I know that. But it isn't, it is a little bit stimulating to look at the numbers and see that the most arguably most innovative state, most innovative population in the world and certainly the most innovative state in the United States over the last 30 years and the most remarkable engine of wealth creation and innovation, California does not enforce non-competes. And we unfortunately, despite the flood of smart people into the state every year, year after year, that rising tide which covers a lot of sins, we are not doing particularly well. And look at that. We're up at a bad level in non-competes six which is bad. Zero means they're not enforceable. So here's my little canonical example and Lee, if I could ask you to hit the down button when I smile or wink at you. So I posited that there, just to make the math work and to make something I could stick into a spreadsheet, that there are sort of generations of companies and there really are. And the first generation here was digital and DG, the classic mini-computer companies. You could even go back further than that, but that's good enough for the purposes of this analysis. Apollo and Prime came next, parametric PowerSoft, which were software companies, predominantly Lycos and Akamai, the first two big web hits in the Massachusetts economy. And they're correlating companies on the West Coast. So let's just say that we're on the dawn of the fifth generation. And let's say for the sake of argument that every successful company spawns roughly on average five startups that come out of it. And they come out of it really from day one. For example, Ken Morse, who runs the Entrepreneurship Center at MIT and was a successful entrepreneur at Aspen Tech, was one of the founders of 3Com. He left quite early. People often leave startups fairly early for a variety of reasons and do new startups. So let's just posit here that the fertility rate is five, that every startup, every successful startup creates nine, five follow-ons. Of course, you'll get a geometric progression, 525, 125, 625. Okay. Now, let's recognize that there's death. There's attrition in the economy and that all companies don't become successful. And I put a canonical number of 0.5 here, which is probably a pretty good number. Sort of what venture capitalists think about. So by the end of each generation, half the companies that started that generation are gone. They're dead. Okay. But the companies at the beginning of each generation, each spawn five companies. So at the beginning of generation two you had five companies. Two and a half have died, leaving you two and a half. But those five spawned five more. So essentially at the end of the whole cycle, generation five will have 312 and a half companies. Because we have the raw growth rate cut in half by the end of each period. Now, what happens if we have non-competes that discourage startups before they ever get started? This silent killer. It's like diabetes. Right? It kills, it's like being stillborn. These little creatures of innovation and people's dreams, they get killed before they even start. And I've witnessed it again and again and again. People thinking about starting a company, they don't hit any radar screen, nobody knows about it. They quietly say to their spouse, I think I better, you know, we got the mortgage and all that, I don't think I'll do it. What happens is, go ahead and hit it please Lee. If you have a non-compete kill-off rate of point five, a stillborn rate of point five at the beginning of each generation, of course that affect compounds. And it results in a terminal number of companies that is dramatically different. Now this is a canonical example, made-up parameters I recognize. But look at the dramatic effect. Isn't that about gut feel, the ratio of successful tech companies in California versus in Massachusetts? Again, I recognize correlation isn't causality, but it's pretty suspicious. So I put that up to be provocative and I'll leave it to you to John to take the next step. Paul, thank you. Well provoked. Nadia, do you have a question? Do you want to come to the mic and then we'll go to Bijan after that? I actually have a definition question. I'm sorry if I had missed it. Tell us who you are. The definition. Oh, I'm Nadia Shalaby, BVN Technologies. And the question is, what exactly do you mean by non-compete? For example, the canonical references usually, if I'm working at a firm and I leave, I have a non-compete for six months or a year where I cannot work in my area of expertise, hopefully closely defined in my employment agreement with another company. And yet there's other forms where I don't have that or I have that and orthogonally I cannot recruit from my old company for the next six months or a year. And in Massachusetts, from my experience, both are valid and both are enforced quite strongly by the company that you're leaving. I don't know what the situation is in California. I think both are stifling in the, according to what the previous two speakers have been talking about, but I just wanted some comments because they don't exactly go together. Thank you. That's excellent. I'm going to use that actually as a segway. I'm going to let you off the hook for a moment. A segway to Bijan Sabat, one of the founding members of Spark Capital and a general partner there, someone who has been advocating on this issue on Beacon Hill and otherwise for some time. And I know one of the things that comes up to you from time to time, Bijan, is some confusion about what we're talking about here. So maybe to kind of ground the arguments we've already heard here from Lee and Paul, give us a sense of what exactly we're talking about in terms of the documentation and what it might also be confused with from time to time in the discourse. Yeah, that's great. Thanks everybody for coming. It's great to see everyone here. So just before I answer that question, just by a show of hands, how many people in this room have worked in California? Okay, great, me too. So just to answer this question, you know, non-competes is a lot of myths and confusion around this topic. And what typically happens is employers are asking or requiring employees in the state to sign a non- complete agreement, which says specifically that you won't work for another company and the definition of another company is the issue. So it just says that you cannot work for another company for a period of time, sometimes six months, often one year. I've actually heard of some cases longer than that, but that's unusual, in an area that seemed to be competitive. And it's in the employers, you know, the experience that we've seen is that the employers keep that definition extremely vague and it causes a lot of confusion. Or sometimes employers will list a number of companies, but it basically says that you're not able to work in a related field for some period of time. It's often confused with employees and employers with other agreements that are put in place like non-suslitation agreements, which is you can't directly recruit your colleagues or fellow employees. There's non-disclosure agreements, which is about protecting confidentiality. But these are all very separate, very discreet agreements and this notion that these are confused or they should be thought of as one agreement is part of the issue. Great. Bijan, thank you. Over here. So Bijan, thank you for the clarification, but let's actually get really precise about what we're talking about and why this issue matters. So sitting about four rows back is the chief privacy officer of Facebook, Chris Kelly. I hope Chris will come to the mic later on. He's flown in from California just to talk to you here and other things. And one of the things that galls us here on campus, of course, is that Mark Zuckerberg, Chris Hughes and his colleagues started this little company, not very far away, in a dorm room. In fact, just at the right moment, the policy was changed at Harvard to allow startup companies in dorm rooms just to permit Mark Zuckerberg to have a lawful startup. And somehow the address for Facebook is not 02138. It's on University of Palo Alto. Chris Kelly has to fly a long way to get here to be part of this panel. Are you actually saying that Mark Zuckerberg and his team would be here right now, funded jointly by Highland and Spark instead of Excel and others and still a growing company in the Cambridge area or the Boston area if only non-competes were, in fact, as they are in California? Do you think is that sort of a legitimate way to think about this problem? Well, I guess first off, if Excel or Greylock wants to sell us their shares, we're happy to buy it. So that's the first off. I don't want to paint this story with a broad brush. I mean, Spark was not around when the company was started. I'm glad that Mark didn't have to sign a non-compete with ConnectU or any other previous employer. Thankfully, it's good for the whole internet economy that the employees of Facebook didn't have any non-competes on their file cabinet. So whether Facebook, his angel investors were on the West Coast, whether that was the right place for him, I also understand, I don't know Mark, but I understand he wanted to go there anyway, anyway. Whether this was the issue or not, I wasn't there for those conversations. But I can say that it's good that he wasn't locked up. I think that's the key message is that you need to create an open environment for innovation. And I think in a world where we try to close every door where there's not interaction between people, I think Paul's slide, I love this slide about the spawning of generation to generation, because that's exactly the point. Every startup that I've been successful startup that I've been directly involved with or I've seen firsthand as an investor or colleagues, et cetera, has been a result of people leaving their former environment. Rich, hopefully, will talk about his experiences as well, but his co-founder at Android used to work at Danger. You could argue there was some overlap there. Thankfully, there was no non-compete that blocked anybody from innovating. Andy used to work with me at Web TV. We didn't have any non- competes, which is great, because the founding team came out of Apple, where we would have been held up. So you need this kind of open environment. So anyway, I hope I'm not dodging the Facebook question. I don't know Mark specifically. I would have had no effect on Facebook, because thankfully, Harvard University is one of the few employers in the state that does not have non-competes for its customers or its employees. But it does, for an example, affect someone leaving, thinking about leaving, Akamai, to start a company. And in fact, as I mentioned to you earlier, John, I've now seen five startups in the CDN space that will ultimately, one of them will probably ultimately replace Akamai as a market share leader. That's just the way capitalism works. And all five of them are in California. And the question at issue is whether the successor to Akamai will be in Massachusetts, because we've developed a group of people who have an expertise in that technology and that business, or whether it will be in California, because of the less restrictive laws there. That's the issue. It really doesn't affect somebody coming straight out of college. It usually affects the people who are more experienced and exactly the people you want taking a technology to the next level. Great. So Rich Miner, vice president of Google, you've been working here for some time. You also represent a company from the West Coast. And right now, you're recruiting for a big office right down the street. Many of our grads would like to come work in your office down the street in Kendall Square. Tell us a little about your experience, both as somebody who is obviously affected by this personally, but really the effect on your recruiting process here at Google in Massachusetts. And is non-competes actually? Is this an issue? Sure. And I'll give my experiences. I'm not speaking on behalf of Google policies, but I'm happy to talk about my experiences with Google in the past. And I sort of have cycled through startups, which I'd like to do, and then large companies, which I seem to somehow end up being a part of after I start a company, and then also have worn a DC hat for a while. So I've sort of cycled through this particular problem from several points of view and started chatting with Bijan about it because I think it was probably a little over two years ago, probably even more than that. But for a while, I've been concerned about the vibrancy of the Massachusetts economy. I've been looking at what some of the factors are for the high tech industry here that I see us losing talent, losing companies like Facebook, losing huge numbers of grads and high tech who go to the West Coast and elsewhere. And one metric that I use is if you just look at the hiring adventure capital companies, companies like Raylock, which was almost referred to as if it was a West Coast VC firm, but was actually an East Coast VC firm. It just started to put partners on the West Coast because that's where the activity and investments were. I started to become concerned and non-competes was one of the, if I was to say, what are the top three issues if you're doing TQM stuff, you like to say, what are the top three problems you want to solve? So what are the other two just to be clear? Oh, I think there's social issues here on the East Coast. And it's hard to sort of nail these down, but there's certainly not the energy and chemistry around, oh my god, you're taking a three-week vacation. You should be starting another company. So it's just, and if you talk to professors at Stanford, they're sort of shamed if they haven't gone on sabbatical for several years to start a company versus you don't quite see that same attitude at Harvard and MIT where they're happy to invent stuff and help it get pushed out and take a percentage of it, but you don't see them jumping as rapidly on top of. So there are several things. And you just don't have the cafes and pubs where you walk into and everyone has their napkins out in their architecture diagrams. And so, and I think you can do things to change those. I think all of these things require big pushes and work. On the non-compete issue, I have been directly had this as an issue when I, with my first startup company, Wildfire, we had an employee we were trying to hire. We did hire, hired him out of Converse. And after he had joined us as an employee, they came after us for his non-compete. And the sad thing was this was just an individual contributing engineer. This wasn't a senior executive. He wasn't walking out with the sales list of the entire company or the plans for the next five architectures. He was a very strong individual contributor who had studied in school the discipline that he had been hired into Converse for and that we had hired him for. And yet, we had to take him out of the company for some period of time and continue to support him and wait the six-month or eight-month period, whatever it was, before we could then again bring him back in as a full-time employee. And when I look at the arguments, so my whole view on this is I've seen it hurt people, both companies and individuals. And when I look at the arguments on the why people say there are benefits, I don't typically understand them because what's and unfortunately for various reasons, we don't have that many people arguing the other side that hopefully there's a few people in the audience who will challenge us and they'll get their chance in one moment, hopefully, someone will be leaping up to the microphones to challenge it. But when I hear the arguments coming from the other direction about, you know, company secrets and trade secrets and other things, I mean, there's intellectual property law that's very strong, right? So patents, copyrights and other things, anything that would be tangible that a company would own. And let's go back to the Converse wildfire example where wildfire was building, you know, sort of a voicemail on steroids or this personal assistant product that you could talk to and had voice messaging as part of it, Converse was building large voicemail systems, anything that was related to Converse architectures, source code, you know, even documentation, all of that stuff is either a patented copyright or in some other way protected and couldn't be transferred into our company. You know, other than the acquired know-how as to how you, you know, debug C code and do other things in this engineer's brain. And so there's strong intellectual property law that seems to already cover most of the issues that people cite. And then the other fear mongering around, you know, you'll disrupt, you know, our ability to invest in this company, you'll destroy their value. Again, we've already cited. Look at the West Coast examples, right? They don't have, you know, non-competes. They're not enforceable here. And the West Coast high tech companies seem to be doing just fine. So, you know, Google doesn't have non-competes. We consider ourselves a West Coast company. That includes when we start offices and other regions. We don't require anyone to sign non-competes. We don't think they're necessary. And we're happy to work without them. And, you know, You've been known to hire somebody from other firms that have non-competes, too, right? Yeah, yeah, no, no. We've, you know, kifally, we had to, you know, put him in a box for a while as well and have him doing some purely academic and political stuff for us over in China before he could start digging his fingers into real meaty stuff. So, no, it's, you know, Google does get hit by this as well when we're hiring people from other, you know, other states where non-competes are enforceable. So, to me, it clearly puts road bumps into high-speed paths towards innovation. The things that it protects don't seem to be that, again, seem to have other much better ways of protecting those things. Clearly, it harms individuals. And again, simple example, somebody studies speech recognition, gets a PhD in speech recognition. So they've spent tens or hundreds of thousands of dollars on education. They've studied this for a decade. They go working for a speech wreck company for five months. They decide, you know, to go join some other company with one of their buddies who started or whatever. And they're held to some one- or two-year non-compete. It just, to me, doesn't make a lot of sense. Great. So I want to issue a particular invitation to anybody to come to the microphone with a question. But I'm going to ask one more, as I hope some people will come and line up to speak. So, Paul Mater and Lee, you both presented some evidence, some evidence that non-competes in Massachusetts result in less innovative activity, right? So is there anybody here who wants to raise your hand if you think Massachusetts should be less competitive than it is right now, right? This, we all agree that we want Massachusetts to be more competitive and more innovative. I think that's an agreed upon statement. But when you look at these data here, Paul, you raised the critique of yourself, which is it's hard to think about correlation and causation in exactly the same terms. So if you look on this particular slide, North Dakota scores a zero, right? I don't think anybody is making the case that North Dakota is a hotbed of innovation in the way the Massachusetts wishes it were. Likewise, you have Washington State with a five, which presumably has some good things going on and so forth. Texas has Austin. So there are other places that are doing very well. And of course, we are too to some extent. And if you flip later into your slides, clearly there are other things that might be contributing to this decay that you described so beautifully. So how can you convince us that, in fact, non-competes is the key factor? If we were to switch this, how do we know that, in fact, we're going to have a more competitive environment based on these data? Well, obviously, non-competes are not the whole story, but they're a big part of the story. So let's talk about the states you mentioned. North Dakota, the first criteria for entrepreneurship is a reasonable number of days during the year when it's above zero and less than 30 mile-an-hour winds. Washington, interestingly, has two great technology companies. Let me say that again. Washington, interestingly, has two great. I haven't noticed any competing operating system companies that came out of Microsoft and are operating in the Washington area or any competing online book sellers that came out of Amazon and are competing in the Washington area. May just be coincidence. Real network's no longer rates. This is a factor that you obviously have to weigh against other factors. It's a contributor. But in Massachusetts, we have one of the reasons I love to live in Boston. We have 126 colleges and universities that every year bring in some of the brightest, most ambitious people in the world. I mean, that is such an unbelievable advantage if we cannot turn that into the most innovative state in the country, then we're really lame. And I think we've got a few very specific factors working against them. I happen to think whether is not one of them. All right. And I happen to think that intellectual capital is not one of them. I happen to think diversity is not one of them. I think we do very, very well. Capital is not one of them. There's a lot of capital here. This is clearly, in my view, a significant contributor. And as I said earlier, it affects negatively, not just employees. And Rich talked very eloquently about how some people are sidelined. That employee that you mentioned who sat on the beach for 8 to 12 months, I don't think that was his best and highest use for society. It also affects companies. They get lazy. And as we know from studying history, indentured servitude carries with it a negative present value. 150 years of cheap cotton was not worth the moral cost or the financial cost of the Civil War and the subsequent 150 years of a society that didn't allow people to reach their full potential. Indentured servitude throughout history of any sort, however subtle, and this is a very subtle form of it, I will agree, carries a negative present value at some point. And so we really have to think about how sleepy Massachusetts companies have become because they've had this club over their employees. Rich said, if people leave, why invest in them? I would say, if people cannot leave, why bother investing in them? And a lot of companies don't. Very interesting. Awesome. So I want to go out here. But there was clearly a call to arms in there also to universities. I think one of the arguments that's quiet here, but is Harvard University, is MIT or other places doing what they could to make this an innovative environment. Obviously there's some of us in the academy seeking to do that, but I think there's much more that we as universities could be doing, and we can talk more about that in the second panel as well. Yeah, and I actually think there's one thing we could all do right away. And that is, as often as we can, go to Harvard Business School, go to Harvard College, go to MIT, and tell people about non-competes. Tell them that when they come out in the job market, they don't need to sign them or at the very least, they should ask about them at the beginning of the interview process, not on the first day of work. When it's already too late. It's handed to you by the HR person. Educate people. Awesome. So we have two people deep here, so we'll start with this one. Please tell us who you are and you're on the record. OK. My name is Daniel Jalkett. I'm owner of Red Sweater Software, a Mac software company. And I wanted to make a quick comment. I sense a little bit of lack of clarity about identifying or using some of these anecdotal evidence points where it doesn't exactly add up to me describing, for instance, Facebook leaving to go to California. I imagine if you're coming straight out of college, this is exactly the group of people that these non-compete problems do not limit from starting companies. So that takes it back to being a question of whether starting a company in that environment, for instance, if Facebook stayed here, would they have a tougher time recruiting talent from people who, I guess, are ostensibly limited by non-compete agreements? So I think that in some sense, you could look at the other side of this as if we have all these really talented students coming out of Massachusetts schools and they're going to California, I think that's a really strong argument that the non-compete aspect is if it's part of the problem, it's a subtle part of the problem that's failing to produce these attractive companies. But another angle of that is that all of these companies in the Boston area should, by the argument of being hurt by non-compete agreements, be voraciously consuming talented graduates from the area. So if they're going to California, I think there are other things that are attracting them. So your point is non-competes are an issue, but it's a tiny issue. Well, I'm just saying I'm not being convinced by this logic completely because, well, for instance, like I think Paul, you said that it would not have affected Facebook because, and then the argument was because I think he was straight out of school. True. But at the same time, I think people are arguing that the problem is systemic and that we're not getting these. So I would imagine if I bought into this argument, I would say, and I'm starting Facebook, I would say I can't keep the company in Massachusetts because I'm going to be stuck not being able to hire people who are committed to non-compete agreements. Hey, John, could I take this one for a second? Yeah, I mean, a couple of things. One is maybe there's some ambiguity here, but I believe Mark worked for another company before he started Facebook. So if he was locked under non-compete, he would have had a problem. So that's thing one. Thing two is starting a company is not the end goal. It's the beginning. So if you look at the last four or five executives that Facebook has hired, look at where they've come from. His number two person came from Google. They just brought in a whole bunch of Yahoo people. You can't swing a dead cat in California without seeing a Yahoo person leave and not joining a Facebook or another like company. So if you're a young entrepreneur, you know that you can go out there and grab people that have domain expertise without any restriction. So our West Coast VC counterparts, our West Coast entrepreneur counterparts can innovate and fund and create without any restraint. So what Paul and I see every day is we see entrepreneurs that come in. We see them have an idea and we say, do you have a non-compete? And if they do, we have to make an analysis in our head, is it worth it for us? So we're making a couple investments a year. Do we want our money to go towards creation or litigation? And these startups are hard enough. So we may take a pass on the ones that have confusion. But if you're a young entrepreneur, I think this argument that says, hey, you're fresh out of grad, sorry, fresh out of school, by definition, you have no non-compete. It doesn't impact that demographic. I think you have to think that person immediately is going to go raise some angel money and they have to go hire a team and where are they going to go get the team from? Great. Next question, please. Sean Broderick, founder, CEO of Trustplus. I have a question for Paul. Highland's been around for quite some time, funding companies in Massachusetts and other places. I'm curious to know what Highland's philosophy is on the issue of non-competes, whether or not you brand it as a non-grata exercise in your companies. And if so, if you've been doing that, that should provide some interesting historical data about those multiplier rates that you were talking about. Great question. So first of all, I've been talking about this topic and thinking about it for a couple of years now. I have, over the course of those couple of years, encouraged more and more of my personal portfolio companies whose boards I sit on to not require non-competes of their employees. I have not yet gotten to the point where I've had a sit-in in my partner's offices and told them that we ought to make this a firm-wide policy. I'm actually thinking, I was going to talk to Bijan about maybe coming up with a mark and literally trying to brand the idea that we would discourage our companies from asking employees to sign non-competes. Because as I said earlier, it's actually not just bad for employees. It's bad for companies. It's certainly bad for the environment as a whole. So ask me that in three months because I've got this 80-hour-a-week job being a venture capitalist. I don't think about this topic when John calls me up to sit on a panel. We're delighted you did. So let's not give my hard time. I think I actually will. I think it's a great point. I think John asked how you change this. And I think there are three pressure points. There's, by fiat, by legislative fiat, I don't think it's going to happen. It's by educating employees so that they're more savvy when they're in interview cycles. And the third is to get venture people and people who sit on boards to have a voice on this topic. And I think we could probably make a lot of progress in that regard. So thanks for raising that. Excellent question. So Nibb wants a quick response and we'll go over here. Oh, Steven, please. One second, please. Please, can you stand? So there is another way. And Matt tripped over this in his field work. And it was New York financial industry where the firms decided amongst themselves not to enforce non-compete. So there's a brokerage industry, yeah. So you could do that with whatever firms decide to opt in. And then it's sort of a collective action. So they did it, essentially, as a cartel in one industry. Yeah? And why did they do that? Because they were just tired of wasting money on lawsuits? That's very interesting. Self help by an industry. I love it. Steven Chow, I'm a intellectual property lawyer from Burns and Levinson and I speak on my own account. I also happen to be a long time uniform law commissioner for Massachusetts. So I'm involved in drafting such matters as a uniform commercial code. And of interest to this one is the Uniform Trade Secrets Act, which Massachusetts is one of the five states that has not yet adopted it. I'd like to just give a brief historical background on non-compete agreements that 30 years ago, when we were creating firms such as Digital Equipment and DEG, and otherwise, these things were not enforceable unless there was a trade secret involved. And although the case law today says confidential information and case and trade secrets. What has happened in a lot of ways, the traditional Anglo-American tradition is for free trade. The idea, 30 years ago, we were told that the Anglo-American tradition was greater than the Continental tradition because we did not restrict how we move our property and so forth. And but that's changed and it's changed largely because of how contracts are done. In the life sciences area, I see a lot of non-compete agreements but they're negotiated. They're negotiated on field abuse and if my investigation is canceled, I can still compete in that area. What happens in the tech industries is that you have these things that are mixed up and every non-disclosure agreement says everything here is confidential. And people have to sign these even though they're employees as well. So Stephen, how should it be? Tell us at this present moment as a Burns and Levinson intellectual property attorney, how should it be in the state of Michigan? My personal view is that I would go the California route but that's not going to be politically possible because both a generation go I used to sue EMC on behalf of digital equipment all the time and the incumbent companies are against it but not only incumbent companies but the investors and the small companies. If you want to, is a cheap way of preventing people from walking out. It's also keeps the price of engineers down. So Bijan, you're jumping out of your seat to respond. Oh no, I'm sorry, I was just listening. I think this concept of Paul said of indentured servitude and what Stephen's saying about cheap labor is really the point. I think that it's a conversation, the whole point of today and this topic is to shine a light on it so that we're talking about it. And what Paul said is also right which is we're typically one of many investors in these companies. So Spark is now invested in 24 companies all over the US. I can't say here today that every company has gotten rid of their non-competes because we're one board seat and one shareholder. I can say though, Spark was born out of a couple guys leaving CRV and a couple guys leaving battery. So we couldn't do Spark unless we didn't have a non-compete. So as a result, our employees don't have non-competes and we don't put them in our term sheets, et cetera. But I do think that this is a process and more and more investors are coming to this point of view. So we started this very modest undertaking last fall and we created this website and we've got a number of partners at different firms, maybe not representing their entire firm but as a principle of what they're trying to get done they're migrating over. So Michael Greeley from Flybridge is on the list, Mike Torell from Venroc, Jeff Fagnan from Atlas. There's a roster of folks that are looking to make a change here. I just want to finish the answer to the question is that an intermediate position would be Massachusetts to adopt from Trade Secret Act which would actually define it more neutrally and apply that more rigorously. Well put. Sir. Hi, a quick comment and a question. I'm also, my name is Mike Rosen. I'm with Foley-Hawaga, another law firm around here and litigate non-compete agreements a lot. I'm both sides. Do you take both sides? Yeah. Both sides. It's a business. You could call the state of non-compete law a lawyer's full employment law. And from that perspective, I can, just the observation I'd make is that a sort of large frustration that everybody has in this area. I have it as a lawyer trying to advise clients and I know my clients have it and this is again on all sides representing individuals, representing companies that want to enforce or want to hire somebody. It's just a fundamental level of unpredictability which obviously just has to, logically, has to have some kind of economic effect. And so I would think that ideally, even if you're going to have enforcement, continued enforcement of non-competes, if you could lower the level of unpredictability by providing some degree of certainty, some parameters, more than we have right now at common law around this area, it could be beneficial for everybody involved except maybe the lawyers. But the question I have is I've been following this issue with interest. I was very interested in what B. John's firm was doing and I understood that you had been in contact with the governor's office and I've heard rumors that there are some within the legislature who are talking about this. I'm just curious whether anything has happened with that. Is there any impetus to do anything? Is there any proposal legislation? So that's my question. I was invited by Joyce Plotkin who runs the Mass Tech Leadership Council to go down and meet with a person I think the undersecretary commerce on Beacon Hill with me was Steve O'Leary from Jeffries Quarterdeck and a gentleman who's a CEO of Chronos, I can't remember his name. And so he presented the opposing view. He's actually on the board of the Mass Tech Leadership Council, I am not. And the person we met with was very attentive and it was clear that he was thinking about four or five issues that the governor might wanna take on and it was clear from the meeting that this would probably not be the one about which he would be most enthusiastic. In my view, the same thing always happens when you ask a politician to do something, a legislator or an executive member of the executive, the first calculus they do is what's in it for me, politically or otherwise. And if anyone raises their hands on this issue, I think they will immediately be group tackled by many of the CEOs of larger older companies in Massachusetts and that the issue will quickly die. It'll die as quickly as the idea of starting a company dies in the mind of someone who's living under an entropy. So I don't actually think, I think increasing awareness by talking to the governor or talking to the legislature is a great idea. I ultimately think that's not the avenue for change here. I agree with Paul that I think this needs to be grassroots, I was supposed to be at that meeting, I'm on the board of Mass Tech Leadership Council and I'm also on the board of MyTex, which is another group that similarly represents companies in the high tech and media space and I continually try and raise this within both of those organizations to bring the issue up, but I also think it's something that I think, and I also raised it with the governor when he was at our office for launch of Google's office here, but I do think that it's gonna be something that's gonna probably lead with us getting the public aware and us doing things individually and raising awareness of this issue and a broader as opposed to a very focused legislative approach. Rich, thank you. So let's do these next three questions and then we'll switch over to the second panel if that makes sense, so sir. I'm Mike Feldstein, I'm engineering VP for Y Power Inc, which is a startup company. I have a perspective that's broad in that I've been an engineering executive both in Massachusetts and in Silicon Valley, and I've both been subjected to the restrictions of non-compete agreements and I've had that effect on people in the organizations that I've run and I've worked just as an aside for Data General, for EMC, and for a startup venture capital based company in Silicon Valley. So I've kind of seen both, if you will, both sides of the table and both sides of the issue. And I wanna ask kind of a controversial question to get it because it's one thing that I've seen in the conversations which is that there's an implicit equality being presented between innovation and startup companies. You can measure innovation by the number of startups. You can measure innovation by the number of people who leave to go to startups and you can measure innovation by the success of the startups, and that's a very natural thing to do and I fall into that mode myself sometime. However, I don't think that that represents innovation. I don't think startups represent innovation. In fact, maybe that's part of the, we gotta be careful that the research looks at that as an independent variable because the question really is, would companies that have non-competes if they had them in California or would shooting, would companies in California be able to be more successful in the long run because they kept their employees and therefore the same company could innovate internally rather than have to have a startup company show the innovation because there's a, people kind of believe that the companies in California are more innovative because there are more of them. Yet in Massachusetts, we don't have the same number of companies, therefore we're not innovative. Okay, so do startups equal innovation, but I also wanna add an element to it. One of the quiet sort of themes that's underlaid all of what you've said is, in a way, big companies, Microsofts, EMCs, Akamai's and so forth, they want the non-compete approach and startups don't. Is that really the, is that sort of an accurate description of the state of affairs? And I think those two questions effectively go together. So. No, I don't think it is. I think startups want them too. I think actually everybody wants them except for venture capitalists and people who are thinking about leaving their current employer. And the latter tends to be a very hard group of people to find, to form a lobby around. I know, because I spend my entire career trying to find them. And hire them, right? Yeah, I mean, I've got a, I mean, so a valid question, but I'm not sure I believe in the premise of it. People, first of all, if somebody is thinking of leaving to go join a startup and do something, it's probably because they're unhappy with what they're doing now or they've got different ideas and they're ready to move on. Trying to retain those employees is probably not in the best interest of a company or in the employee. I think, as Paul said, you're better off, you know, focusing on other ways to incent your employees to stay and keep them motivated than by trying to put shackles on them to keep them and prevent them from moving. So I do think the rate of startups is a good way of looking at the rate of innovation. I don't think that it's a negative, I think it could be a negative to try and have people stay at your company and not leave if they're disenfranchised and want to move on. To this other question, I think there's a... I'm sorry? I wasn't suggesting that you should try to find a way to stop them from leaving. What I'm suggesting is that the measure of success might not be the fact that a startup started, that same company might have been successful if it hadn't had its entire product development team go off either as a group or as individuals or carpools or whatever to start another company for a whole bunch of other reasons that have nothing to do with... But I don't think that typically happens. Short response to that. Just real quick, if you go... So go talk to some large companies, talk to senior executives there. Ask them how many people have left their company in a way that they took information that did damage to them and how much it's cost them and how much time and money and effort that's cost them. Verse, then ask them how many times have they been hurt trying to hire people who they couldn't hire or who they had issues with? You'll often find that they've been hurt more by non-competes than they actually can say it's helped them. Just talk to people locally. I've had that experience. Very interesting. So gentlemen, I'm gonna ask you each to ask your question and then we'll have last words by way of response. But sir, will you go first? Chris Herrad, I'm a local entrepreneur who's been often asked by local VCs to require my employees to sign non-competes. So my question is, does anybody on the panel or the lawyers in the audience know or have any thing that might inspire us about how the laws evolved differently or the practices evolved differently in California? Are there any lessons to learn there but why things are different there than they are here? So how did it come to be that California has this better deal? Sir, would you ask your question as well and then I'm gonna let the panel make some conclusion? Yeah, my name is Rajan and I'm a technology entrepreneur and my friends are telling me that in California that companies are starting to do something slightly different. They're not saying non-compete agreements but they're having a paragraph saying inevitable disclosure that you will not work for any other company where inevitably in the course of your work you will disclose anything you learn on your present job. Isn't that a non-compete by another name? Very well said. So we actually have one last person sneaking in, one last question. So let us have it and then we'll have the panel respond in total. Yeah, my name is Prudence and I'm a student at Suffolk Law School editing program focusing on IP. My question is that you mentioned that there are laws in IP that will protect the employers but seems like for the trade secrets it's not easy for the employers to prove that a search was a secret to protect. How do you think that you can both protect the employers and the employees with the non-compete agreements? It seems like even the employers would suffer from their secrets being traded to competitors. How do you compare or how do you avoid the unfair competition? Thank you. All right, so knowing that we're eating into Paul's time with the next panel I wonder if each of you would care to respond to these questions and by way of conclusion and maybe we'll start with Paul and head down to Bijan. I'll pass because I don't wanna take time for my own time. Awesome, yeah, thank you. A statement of interest. I can be with myself. That's great. I'll just say that running the counterfactual as the gentleman just mentioned is very hard. Getting a real handle on these issues is tough, please be careful. I think I got my closing behind, I'll let you wrap up. So Bijan, you get to answer all of those three questions and tell us what we should think about since this is in fact your inspiration. Let me see if I can play them out and I'll go very quick in respect for Paul. But so this issue of aren't California employees locked up anyway because they can't disclose what's in their head and do we really have an issue and I couldn't disagree with it more. So California employees do not have this restraint or this constraint, excuse me. They have other issues. There is a statute on the books that says for an M&A event, you can lock up employees because the courts feel that there's balance in that relationship between a choir and a quiree but outside of that, they're free and clear. Jay Hatch again over there taught me that one so I appreciate that. So I think that was question number one. I guess the last question is the question that it comes up again and again which is how do employers protect their intellectual property and their trade secrets and then isn't non-compete agreements the way to protect that? And our collective feeling here is there's other ways to protect that. There's non-disclosure agreements, there's non-solicitation agreements and I firmly believe that we need to protect those things. Those are documents and those are agreements that need to be strengthened. So if we're trying to lock up people under non-competes because those agreements are perceived to be broken, let's fix those and not try to throw other agreements into this mix because we feel like those agreements have become suboptimal. And then the last thing is on this issue of protecting the employer, we just have to look again and again at California companies, they're not being hurt. Apple computer doesn't have non-competes and they're doing just fine. Google is doing great. I think one of the reasons why they've implemented this rule of 20% of your time you could do work by yourself is because they want their employees to be happy and stimulated so they don't go down the street and work for a competitor here in Massachusetts or New York or California. So I think you're gonna have better employees and you're gonna have happier shareholders if you open up and not try to lock down your employees. Excellent, so if you would, please join me in thanking this panel and we're without... Come on.